Investing in equities has long been a proven strategy for building wealth. Over time, stocks have the potential to deliver superior returns compared to other asset classes. However, investors should focus on companies with strong fundamentals and the ability to grow profitably, even at a large scale. These companies are often better equipped to weather market volatility and generate above-average returns, especially for long-term investors.
With this backdrop, here are my two favourite Canadian stocks well-positioned to deliver solid returns over time.
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Hammond Power Solutions Stock
Hammond Power Solutions(TSX: HPS.A) is one of my favourite TSX stocks. It manufactures dry-type transformers, power quality products, and related magnetic components, targeting high-growth markets such as data centres, renewable energy, and electric vehicle (EV) charging. The company also maintains a steady presence in traditional industries like mining, oil and gas, utilities, and commercial construction.
Despite broader weaknesses in commercial construction, HPS continues to report impressive growth in both sales and earnings. This growth is driven by solid project activity in healthcare, infrastructure, and data centres. Hammond’s strategic diversification across geographies, markets, channels, and product lines positions the company for sustainable long-term expansion.
The company is also achieving healthy margin growth, leveraging operating efficiencies, and providing a favourable product mix and strategic price increases. Further, it focuses on acquisitions to accelerate its growth and diversify its offerings. A recent highlight was the acquisition of Micron Industries Corporation, which enhances HPS’s ability to serve North American customers. This acquisition broadens its product portfolio and expands access to Original Equipment Manufacturers (OEMs), opening doors for increased sales of power quality solutions and other offerings.
Hammond recently announced a $20 million investment in its capital program. This capital plan will enhance its capacity for producing large custom power transformers, eliminate bottlenecks, and significantly expand future revenue potential.
Additionally, the company is embracing digital transformation with a newly implemented digital pricing tool and a customer relationship management (CRM) platform. These technologies will allow HPS to analyze market trends, strengthen customer relationships, and utilize emerging tools like artificial intelligence (AI) to maintain its competitive edge.
In summary, its focus on high-growth markets, strategic acquisitions, and investments in capacity and technology positions it well to deliver above-average returns.
Dollarama Stock
Dollarama (TSX: DOL) is another top Canadian stock to buy and hold for decades. This discount retailer operates a defensive business model, delivers above-average returns, and enhances its shareholder value through consistent dividend hikes, making it one of the top stocks for creating lasting wealth.
Dollarama sells a wide variety of consumer products at low and fixed prices. This value proposition ensures that Dollarama remains a go-to shopping destination regardless of the economic situation. The Canadian retailer’s ability to consistently grow transaction volumes and its customer base drives its share price and supports its dividend payouts.
Dollarama stock has surged over 54% year-to-date, far outpacing the Canadian benchmark index. Moreover, the stock has delivered a staggering 208% return over five years, translating to a CAGR of 25.2%.
Beyond capital gains, Dollarama has raised its dividend 13 times since 2011, reflecting its commitment to rewarding shareholders.
Looking ahead, Dollarama’s value-based pricing strategy and continued store expansion are expected to drive increased customer traffic and higher revenue. Moreover, the company’s focus on efficient sourcing and cost management will likely enhance profitability, supporting further dividend increases and its share price.
Overall, Dollarama is a perfect long-term stock for investors seeking stability, growth, and income.
